Speaking at the SMSF Adviser Technical Strategy Day, ATO director Kellie Grant said that the ATO is currently tracking just over 91 per cent lodgement rate for the 2019 annual return. For the 2020 SMSF annual return, ATO tracked lodgement performance towards the end of September was nearing 85 per cent.
While the ATO understands that the COVID-19 restrictions are continuing to have an impact on the lodgement behaviours of some SMSFs, there has also been an alarming increase in the number of SMSFs that then failed to lodge their first SMSF annual return and become what is called the “never lodgers”, according to Ms Grant.
“This is particularly concerning if we can see there appears to have been a rollover into these SMSFs as that is then a strong indicator of illegal early release perhaps having occurred,” Ms Grant said.
“Of the 22,000 new registrants in the 2020 year, 25 per cent have failed to meet their very first lodgement obligation.
“Now, really, that’s not a great start to their journey as an SMSF trustee, particularly as we issued reminders to lodge letters to those trustees about their due date.
“For funds that registered in the 2021 financial year, the first due date for some of these SMSFs will be coming up at the end of the month, so we will be paying close attention and following up on those that fail to lodge their first return.”
The ATO also warned that it would be closely enforcing its compliance through its targeted “three strikes, you’re out” communications campaign.
This is a targeted letter mail-out warning, which starts from a blue letter nudge that encourages trustees to take immediate action and lodge their return. This is then followed by an amber letter, warning the trustees of the potential consequences of not lodging their return and a final red letter, which is the final warning before enforcement action is taken.
“Now, we’ll be reasonable in our approach to this. For instance, if a trustee contacts us after we’ve issued a notice of non-compliance and promptly lodges all overdue SMSF annual returns and commits to us that they will lodge future annual SMSF returns on time, we will of course consider revoking the notice,” Ms Grant said.
More specifically, Ms Grant flagged that the ATO is particularly concerned that some of the outstanding lodgements are actually from tax agents and auditors.
“Now, we hold industry professionals to a higher standard when it comes to meeting their taxation obligations, so to address non-compliance with this group, we are currently liaising with the Tax Practitioners Board and will soon be issuing our red warning letters as part of a separate mail-out,” Ms Grant explained.
“It’s important that we clearly distinguish our treatment of SMSFs and professionals that do the right thing compared to those that don’t, so our message to the lapsed and never lodgers is we are very serious about driving on-time lodgement.”
“We do know there are instances where trustees want to comply, but they run into difficulties, so if you or your clients are experiencing difficulties, we encourage you to contact us so we can help. Coming to us first is always a better option than waiting for us to come to you.”
If administrators cope with their workload they need to take on more staff or move the clients on to another provider.
And where are all of these staff people keep talking about. There are none in the regional areas that can just slot in to the business and go for it. We advertised for 4 months out of the last 12 and have had to compromise with the available candidates, which then takes time from our day to provide training.
Also, rejecting clients just makes them a problem for someone else. If everyone is busy, it doesn’t help get the overdue lodgements down.
Of eight agents I regularly communicate with, three offered SMSF services. Now just one does.
Is this fallout from FOFA were many small firms walked away from SMSF services?
If there are fewer practitioners offering this service, but there are more funds coming online, then it is hardly surprising that a backlog exists!
As an auditor (in the lockdown capital of the world) at the back end of the process I would be concerned about the backlog that continues to build. So far this FY to October approximately 1/3 of funds received for audit are for 2020 and/or prior years. Yet my completions YTD are behind where they were for the same time last year. When factoring in the increase in fund numbers from additional clients as a result of the overedue enforcement of independence I estimate that 2021 lodgements are about half of what we were expecting. At the current run rate the FY21 audits will not be completed until Feb23!!!
Accountants are burnt out / audit staff are burnt out & staff have not had a proper holiday for almost 2 years. With the opening up of the economy I will be encouraging my staff to take a decent break, visit their interstate families, take the kids away and get some sanity back into their lives. This is my priority not some arbitrary ATO deadline (that is never enforced).
My case in point, disregard for deadlines and more worried about holidays. You could always sever ties with this disorganised and delinquent accountants though to help improve your business visability.
No I am not concerned about holidays- I am concerned about the well being of my staff. Lodgement deadlines are not the concern of the auditor. Tax agents can’t expect priority turnarounds when they or their clients have delayed the process.
I do actively manage my tax agent clients but am also prepared to assist those in these difficult times and I am definitely not interested in any advice about increasing visibility.
I have always had more than enough resouces to cope with increased load at peak times. But this is the first time in over 15 years that I have received priority requests in Sep & Oct for delinquent trustees. The lodgement trend is worsening & I cannot see it improving anytime soon.
Totally agree. The lodgement delays will only get worse. I am over accountants requiring priority completion of audits. As an auditor its not my problem and am happy to burn them. There are plenty of better organised businesses looking for auditors.
Lacking of planning on your behalf does not constitue an emergency on my behalf
What’s the rate of non lodgement amongst individuals, companies, trusts, partnerships? The answer to that may indicate whether there’s an issue with SMSFs, or its much broader. Maybe SMSFs are leading the pack with lodgement? From experience my bet is SMSFs are better lodgers than others, especially if the never lodgers are removed which sounds more like illegal access schemes than SMSFs. That would leave genuine SMSFs in the front group of lodgers but being picked on again.
So never lodgers are illegal access schemers and not counted but individuals/companies who refuse to lodge because they may have a large tax debt are not then tax fraudsters?
ATO should be sending quarterly reports to Tax Agents which could be automated saying at this rate you will not meet lodgment deadline because it is December 2021 and you have lodged 22% – you need to either hire, review client base, review productivity or put some thought to this impending disaster now as oppose to June 29. The ATO and TPB just sit back and do nothing – If I work at an accounting firm and I am behind the 8 ball and unproductive the boss may fire me or issue a warning, why does the TPB not care about the very people they license and if they are meeting targets?
Andcor, the ATO has been soft in its approach to Tax Agents for years with little or no action ever taken and I know multiple Tax Agents sooking Covid but they are under resourced, lazy Directors/Tax Agents taking the pith and refuse to do anything about it to get the work done as they might impact their exorbitant wages and profits if they do so. To me there is no excuse to lodge on time and while we have had Covid we have also been locked down with nothing to do and a perfect opportunity to dedicate to work. Hate to see what happens when we reopen here and all these Tax Agents start gallivanting across the globe again, while Rome burns they are off playing the fiddle!
To be fair, there are several tax agents who had to deal with covid type workload and on top of having to meet deadlines. It is not true about “looking after their own tails”, they could do what they could but unable to meet deadlines. There are an increasing number of accountants and tax agents who are suffering from burnout after working so hard for the past 18 months! In my case, we were working on time until covid came into the picture and our workload went out of control and June was supposed to be a “lazy month” but we never had the break. Think about it!
Most I know don’t fit this mold but I do understand what you are saying, I would be delighted to do a free review of your firm if you like as 90% of accounting firms I know and deal with are also so inefficient it is not funny. Antiquated software systems, paper files, no electronic signing, staff they just need to move on and won’t do so, lack of work ethic of the Tax Agent/Directors, several clients which are a noose around their necks they need to move on etc. Work smarter not harder.
I wonder how many resources are being put into chasing all the super not paid by employers?? SMSF’s may well have been compromised by the lockdowns and the constant changing of rules and interpretations. Time will tell.
Could the ATO be more considerate with tax agents and administrators as we have had double the workload due to Covid pandemic!
If you are getting a 25% non lodgement in the first year of registration, then surely the ATO needs to do more to educate and qualify trustees prior to registering the fund. Having been involved in the setup of several funds recently, the ATO has little to no contact with trustees at any point in that registration process.
Similarly, it is not the tax agents responsibility to undertake the ATO’s compliance programs. I’m sure there aren’t many agents out there that aren’t actively trying to get their clients to lodge.
In a few days we will pass 31/10 and at this point over 15% of funds will be 2 years overdue and alarmingly just under 9% will be at least 3 years overdue yet there are no consequences and so the show goes on. Add another year to each group for their last formal audit and it’s not difficult to see there are more than one-off problems afoot.
Its groundhog day
So you relax criteria on Tax Agents and refuse to take any action on them or individuals such as actually fine them and enforce fines then complain about it, OK.